Fisherman's Wharf restaurants drop garbage-rate lawsuit

Correction: Fisherman Wharf General Store owner Jim Gilbert is the only plaintiff remaining in a soon to be dismissed lawsuit over trash rates at Fisherman's Wharf. Brothers Sam and Domenic Mercurio dropped their involvement in the lawsuit shortly after it was filed.

A lawsuit pitting restaurant rivals against each other over trash rates on Fisherman's Wharf has been canned.

After two years of negotiating and, surprisingly, agreeing on a new formula for divvying up the garbage bill by percentage of gross sales, wharf merchants hit a brick wall over trade secrets.

Their agreement required Monterey to establish percentages based on each business's gross receipts. But the city wasn't willing to take on the task and City Attorney Christine Davi said local ordinance prohibits her from revealing one business owner's annual receipts to another unless all of the merchants agree to waive confidentiality.

"That's not going to happen," said Roy Gunter III, attorney for Jim Gilbert and brothers Dominic and Sam Mercurio, who sued the city and other wharf businesses in July 2010 for what they said were inequitable garbage rates.

At the time, Gunter said successful recycling and an outdated allocation formula left some of his clients paying "tens of thousands of dollars" more than they should for trash removal. Allocations, set in 1998, were based on gross receipts, square footage, number of employees and water usage.

Gilbert, whose businesses include the Wharf General Store, and the Mercurios, owners of Domenico's, maintained that most of the garbage on the wharf is now wet refuse from restaurants, which should be paying based solely on their gross receipts for food sales.

According to city records from 2010, that would have placed almost 30percent of monthly disposal costs in the lap of Chris Shake at Old Fisherman's Grotto and an additional 13percent with his brother, Tene Shake of Isabella's.

The Mercurios' share at Domenico's would have been cut to 12percent. Annual garbage rates on the wharf amount to more than $100,000.

Gunter said all of the parties were able to reach an agreement that split the merchants into two groups: businesses whose product is mostly dry, such as gift shops, and restaurants and fishmongers. All merchants would pay solely according to gross receipts, but the dry-goods businesses would pay a smaller percentage of the total.

The only hitch was they needed a tally of each merchant's gross receipts. Davi said she could not release them.

Attorney Vince Hurley, whom the city retained to handle the case, said the plaintiffs declined to have the city release the receipts for rate-setting purposes to Monterey Disposal, which is bound by confidentiality.

"Despite the exemplary efforts by all parties and their counsel, it appears that it is legally impossible to draft a new disposal formula that is dependent upon any measure of gross sales," Gunter said in informing his opposing counsel of the decision to dismiss the suit.

A formula based on any other factor, he said, was "unlikely to bear any rational relationship to the refuse produced by a particular business."

Chris Shake said he agreed to the dismissal "with prejudice," meaning the plaintiffs cannot sue again over the garbage rates. He agreed not to sue to recoup the legal costs of fighting the suit.

Davi said she will take the requested dismissal before the City Council for approval at its next meeting.

Shake always contended the suit was part of an ongoing vendetta against him by the Mercurios. It came on the heels of 2009 criminal charges against Sam Mercurio, who admitted tossing Shake's electronic seating pagers in the bay after luring the Grotto's waiting patrons into Domenico's.

At his sentencing, Mercurio apologized to Shake in open court and said he hoped to "end a period of tensions with the Shake family on the wharf and to begin a new cooperative relationship." The trash suit was filed about a year later.

Then-City Attorney Deborah Mall warned the feuding restaurateurs that she would not be sucked into their "petty struggles on the Wharf."

"You and your clients have a civic duty to promote peaceful business relationships among tenants at the Wharf," she wrote in 2010.

Gunter said the lawsuit had nothing to do with the rivalry. The majority of his clients, he said, were dry-good merchants who recycle most of their waste and "are getting absolutely skewered" with the status quo.

Hurley said he believes the concessionaires will eventually agree to allow Monterey Disposal to set rates according to confidential receipts.

Shake's attorney, Jon Giffen, said his client is pleased the lawsuit is being dropped, but frustrated that he spent two years unnecessarily bargaining.

"We didn't believe the lawsuit had merit but we still, in good faith, tried to step to the table and work out a deal," he said. "We kind of knew (the outcome) was going to be the case at the outset and, unfortunately, we were right."